The Producers 2018: Caelus activity on North Slope remains suspended

Recent upturn in oil prices has not convinced the company to resume drilling activity at Oooguruk

Eric Lidji

for Petroleum News

Caelus Natural Resources Alaska LLC responded to the most recent downturn in oil prices more drastically than any other producer operating on the North Slope.

In May 2016, the local subsidiary of the Texas-based independent suspended drilling operations at its Oooguruk unit and deferred work on its related Nuna development.

The company also slowed work on its major oil discovery in the Smith Bay region, although its decision on that front was also partly a response to state fiscal policy.

In making the decision to halt drilling at its flagship Oooguruk project, Caelus said it would resume drilling “when oil prices recover and investor confidence resumes.”

Even though oil prices have been climbing steadily for the past year, the company is remaining cautious about drilling, choosing instead to focus on workover operations.

In its 12th plan of development, covering the year ending Aug. 31, 2019, the company proposed no new wells or sidetracks. The company announced plans for three workover projects “pending approval by management,” down from eight this past year. In its 11th plan of development, the company had mentioned six potential well locations it hoped to drill when economics improved. Those wells were not mentioned in the current plan.

The company also pushed back the estimated launch of its Nuna development by at least a year, although work continues, and the project seems to remain a company priority.

The company also recently sold 350,000 acres of exploration leases in the eastern North Slope to Eni US Operating Co., its longtime minority partner at the Oooguruk unit.

Workover program

Aside from general repairs, the workover program at Oooguruk involves adding electric submersible pumps to wells or replacing failed electric submersible pumps with gas lift.

As described in the plan, the workover program for the coming year involves replacing failed electric submersible pumps with gas lift at the ODSN-02, ODSN-04 and ODST-39 and repairing casing at the ODST-39 well that was damaged during workover activities this past year. The company said the workover program could be expanded or contracted.

Caelus is also planning a complete shutdown for approximately a week in the summer of 2019 to inspect “the (Oooguruk Tie-In Pad) production separator, turbine generator packages, gas compressors, multiphase meters and other critical equipment.” The work will occur during a six-week window driven by planned maintenance at the Kuparuk River unit Central Processing Facility-3, which is downstream of the Oooguruk unit.

Oooguruk-Kuparuk

The Oooguruk unit includes three pools: the Kuparuk, Nuiqsut and Torok.

Caelus expanded the Oooguruk-Kuparuk participating area this year to include six wells: active producers ODSK-14, ODSN-29 Kuparuk and ODSK-41, active injectors ODSK-35Ai and ODSK-38i, and the producer ODSK-33, which is inactive due to water cut.

Oil production continued as expected from the horizontal ODSK-14 and ODSK-41 wells.

The company completed a workover on the ODSN-29 Kuparuk well in September 2017 and brought the well online in October 2017. The well has been consistently producing 1,500 barrels per day with cumulative production of 263,000 barrels through April 2018.

Pressures in the ODSN-29 Kuparuk well align with those at ODSK-38i in the main Kalubik fault block but not with those at ODSK-13 in the western Ivik fault block. And production rates at ODSK-13 remained level after ODSN-29 Kuparuk came online, further reinforcing the evidence that the newer well is targeting a different block.

The company temporarily shut-in Nuiqsut production from ODSN-29 while producing from the Kuparuk but plans to ask the Alaska Oil and Gas Conservation Commission for permission to either co-mingle or alternate production from both pools at the well.

According to the company, oil production and water-to-oil rates at the Oooguruk-Kuparuk participating area have remained stable (and sometimes even exceeded expectations) because the participating area is a “mature dual porosity system.”

Oooguruk-Nuiqsut

Caelus also expanded the Oooguruk-Nuiqsut participating area to include all existing development wells. The area now has 28 active wells - 18 producers and 10 injectors.

The central ONPA Kalubik fault block is producing from the ODSN-01A, ODSN-24, ODSN-25, ODSN-31, ODSN-36, ODSN-37 and ODSN-42B wells with water and gas injection from the ODSN-19i, ODSN-26i, ODSN-32i and ODSN-34i wells. The company cycled ODSN-01A production this year “to manage voidage replacement.”

The ONPA Colville Delta fault block is producing from the ODSN-10, ODSN-16, ODSN-17 and ODSN-18 wells with water and gas injection from the ODSN-23i and ODSN-15i wells. The ODSN-10 well from 2016 “successfully defined the potential of the area and also demonstrated very high production potential,” according to Caelus.

The northern ONPA Ivik fault block is producing from the ODSN-02, ODSN-04, ODSN-06, ODSN-28 and ODSN-29 wells. The ODSN-29 well is currently offline in the Nuiqsut pool to accommodate initial production from the Kuparuk. The ODSN-07i was converted to injection in January 2017 to provide support for the ODSN-03i well. The company has been restricting Ivik production “when feasible” to minimize increasing gas-to-oil ratios “until injection response is fully established” following ongoing reservoir surveillance.

The company is planning remediation of a “thief interval” in the ODSN-03i well in August 2018. Following water breakthrough at two offset producing wells, the company plugged the lateral at ODSN-03i and eventually identified the thief interval in 2017.

The southwestern ONPA is producing from the ODSN-22 and ODSN-43 wells with water and gas injection from the ODSN-48i well. Production is being alternated between the two production wells “to manage voidage” and producing gas-to-oil ratios.

Oooguruk-Torok

The Oooguruk-Torok participating area produces from the ODST-45A well with support from the ODST-46i injection well. Both wells were returned to operation in 2017 after maintenance activities, but related producers ODST-39 and ODST-47 remain offline.

The Torok formation is an important component of the proposed Nuna development, and Caelus said it plans to apply for a Nuna-Torok participating area sometime this year.

In a plan of exploration accompanying the development plan, Caelus announced a range of efforts for the coming year to bring the Nuna project online no sooner than 2019.

The company had already sanctioned the Nuna project by the time it suspended drilling operations at Oooguruk but delayed Nuna plans as well. The current plan involves three basic parts: maintaining existing assets, improving modeling and advancing the project.

The company said it plans to perform preventative maintenance on assets acquired before the suspension and will eventually continue procurement alongside construction.

The modeling work covers two areas. The first involves improving the geologic and geophysical analysis of the project through well data and also through information about the nearby Pikka unit that would be obtained through the CGG Tabasco seismic survey.

The second involves updating the cost and timeline for facility installation “in light of oil price and tax structure environment.” The company said it planned to “complete the facility design and integration” of the Nuna development with the Oooguruk Tie-in Pad and the Kuparuk River unit this year “in anticipation of start-up in 2019 or later.”

The proposed start-up date in the new plan is a delay from a proposed start-up date of “2018 or later” in the current plan, which was a delay from a previous date of late 2017.

The work described in the proposed plan of exploration is similar to the work undertaken in the current plan, albeit somewhat more robust in planning and modeling activities.

The state had approved royalty relief for the Nuna project but cancelled the opportunity after Caelus failed to meet development timelines. State officials said that the company would be allowed to reapply, and company officials have said Caelus plans to reapply.